Whenever an entrepreneur starts a business or introduces a brand in a particular market, he always aims of expanding their business in every area and city. It takes a while to do so but once done, the next target becomes introducing their products beyond the seas, across the oceans.
International companies prepare a structured plan before entering any nation. Profit is not their only concern. They also strive to create a brand image. Few of these companies become successful, to capture the audience whereas, others fail miserably.
International companies always set their sight on countries like China and India. If everything goes right for the company, then these countries would increase their profitability and bring in more business. But the irony is that conquering these markets is very difficult.
Consumer markets are different, and their needs, tastes, and preferences vary a lot. A developing country like India is a very complex market. Here, the nation is divided into urban India and rural India. The heterogeneous income levels, low per capita income are contributing factors to this complex market.
Here is a list of few International companies that were not able to sustain their businesses in India :3 International Companies that Failed in India
Dunkin' Donuts :
- A popular American multinational coffee and doughnut company founded by William Rosenburg in the year 1950. In 1990, Baskin and Robbins' holding company Allied Domecq acquired Dunkin' Donuts. The company was a hit in the US, and donuts became a staple. The company has more than 12600 restaurants in around 46 countries.
- It was in 2012, that Dunkin' Donut stepped into the Indian market. The franchising rights were given to Jubilant Foodworks, the same company that franchised Domino's, an American pizza restaurant chain. Initially, the concept of doughnuts was welcomed, especially by young adults. But unlike Americans, Indians did not prefer doughnuts for breakfast since they were and still are a little biased towards their traditional parathas and idli dosa. Dunkin' Donuts was more of a pastry shop in India. Doughnuts were cherished only on special occasions. The grab-and-go concept didn't dwell among the consumers. To cater to the acquired taste of the nation, Dunkin' introduced offerings like Mango doughnut, Lychee doughnut. Along with that, Dunkin' also lined up Diwali doughnuts which had savory flavorings like chickens, saffron, and chilly.
- The company also launched a spicy sandwich lineup and burgers. Although it did bring more foot traffic, it created confusion about the brands positioning. A company specialized in coffee and doughnut was now selling burgers and sandwiches. This diluted the company's image in India.
- On top of that, the rapid expansion of the franchise led to a lack of profitability and operational efficiency. Huge retail spaces added to the operational costs. In 5 years, the company's stores reached 77 from 22. This eventually slashed a major chunk of their profit margin. Due to the following reasons, in 2018, the company closed half of its stores. Even though some of their stores are still operational, their presence is lost but to make up for their losses, the company is reintroducing itself with smaller stores and kiosks and is also planning to add more teas to their menus because chai is the only way to an Indian's heart.
General Motors (GM) :
- It is an American multinational corporation that focuses on designing, marketing, manufacturing, and distributing automotive and vehicle parts, and is one of the world's largest automobile manufacturers. The company was founded by William C. Durant in the year 1908. It owned a 50% market share in the US until 2007. Although it is very dominant in the United States, the company's International business didn't do quite well, especially in India. The company started doing its business in India in the year 1928. It tied up with Hindustan Motors to build off-road equipment and Bedford trucks and subsequently, Hindustan Motors acquired a 50% stake in the company. Soon this joint venture began to produce and sell the Opel brand, a mass-market brand GM had owned in Europe. Despite being affordable, the brand was unable to make a huge impact on Indian consumers.
- After launching the second assembly plant in Talegoan, the company started manufacturing Chevrolet vehicles in 2008. With the launch of products like Chevrolet Cruze and Chevrolet beat, the company saw more success and glory. The company was able to sell 3.5 million passenger cars and utility vehicles in India in 2018 In partnership with SAIC, a Chinese company GM launched Chevrolet Sail, a low-cost vehicle that was introduced by GM in the Indian market and so began the downfall of the company in India.
- Another factor that played a significant role in the decline of General Motor's market share was the lack of adequate dealerships and servicing networks. This eroded the market share of the company from 4.7% in 2010 to 1% in 2016. It was in the following year that the company stopped selling its products and exited the Indian market. It was difficult for GM to stay in the competition along with other major companies like Tata Motors, Hyundai, and Maruti Suzuki.
- Despite exploring many options in the Indian market, the company eventually withdrew the investment didn't give adequate returns. And even after exiting the Indian market, General Motors made a point to operate services for existing Chevrolet customers in the country.
- Danone is a multinational European company based in Paris. It was founded in Barcelona, Spain by, IssacCorasso in the year 1919. The company is a leading global food and beverage company. Their business includes the production of essential dairy and plant-based products. In 1995, it became the seventh-largest food group that manufactured fresh dairy products and biscuits.
- In 2010, the company marked its entry into the Indian market and offered products like flavored smoothies and yogurts at premium prices. Back then, it was a company with a valuation of 22 billion USD.
- After launching their products, the company started rigorous expansion in the country and had established over 200,000 outlets in over 20 cities.
- The company was committed to crack the Indian market, but by restricting themselves to only yogurts and smoothies, they failed to grab the consumers' attention. Also, the fact that the concept of flavored yogurt and smoothies was only known to the urban population and by pricing it on the higher end, the company lost a major portion of its target audience. The majority of Indians preferred buying an ice cream priced at Rs. 10 over flavored yogurt of Rs. 25. Although smoothies were popular in western countries, Indians were alien to the concept of smoothies.
- Considering how fractured and localized the Indian dairy market is, even a high-profit margin business of yogurts and smoothies couldn't save the loss-making company. Apart from that, competition from well-established Indian companies like Amul and Mother Dairy, who were able to capture only 7.2% and 3.7% of the dairy market after operating do decades, made it difficult for the company to mark its presence in the Indian market. In Jan 2018, Danone closed its operations in India, and it was in the same year that its investment arm Danone manifesto ventures invested $26.5 million in Epigamia, an Indian Yoghurt startup and as of 2020, Epigamia is standing strong in the Indian market.
Being an international company doesn't guarantee success in every market. Capturing different markets with different local tastes and preferences is a task that not every company can tackle. But once they crack the formula, there is no stopping to the success.